What does 'contribution by equal shares' describe in insurance coverage?

'Contribution by equal shares' refers to a method of handling claims when multiple insurance policies cover the same risk. In this arrangement, each insurer involved contributes equally towards the cost of the claim, up to the limits of the policies they have issued. This means that if a loss occurs, each insurer pays an equal portion of the loss until either the total loss amount is covered or the maximum coverage limit of one or more of the policies is reached.

This method ensures that the financial burden of the loss is shared fairly among the insurers, promoting collaborative responsibility. It prevents any single insurer from bearing the complete cost of the loss and helps policyholders receive compensation more efficiently, while also protecting insurers from excessive claims burdens.

In contrast, other methods, such as 'pro rata' or 'primary/excess', would involve different allocation strategies based on the coverage amounts or priority of policies, but 'contribution by equal shares' specifically focuses on equal distribution among participating insurers up to their respective limits.